August 17, 2015

KOREA

Company News & Analysis Major Indices YG Entertainment (122870/Buy/TP: W72,000) Raise TP Close Chg Chg (%) Artist activities and new businesses to gain momentum in 2H KOSPI 1,968.52 -14.94 -0.75 Osstem Implant (048260/Buy/TP: W79,000) Raise TP KOSPI 200 235.37 -1.95 -0.82 Continued domestic growth and overseas turnaround ahead KOSDAQ 722.01 -9.35 -1.28 AmorePacific (090430/Buy/TP: W540,000) Proven market leadership Turnover ('000 shares, Wbn) Volume Value Kiwoom Securities (039490/Buy/TP: W96,000) KOSPI 556,074 4,562 ROE rises to 27%, driven by core earnings and subsidiaries KOSPI 200 61,393 2,847 Hanwha Corp. (000880/Buy/TP: W60,000) KOSDAQ 440,889 2,964 Uncertainties to ease Market Cap (Wbn) Soulbrain (036830/Buy/TP: W60,000) Value Earning stability has been restored KOSPI 1,228,555 Next Entertainment World (160550/Trading Buy/TP: W17,000) Raise TP KOSDAQ 199,756 New title and China momentum awaits in 2H KOSPI Turnover (Wbn) Samsung Life (032830/Buy/TP: W128,000) Lower TP Buy Sell Net Heightened uncertainties over capital policy and interest rates Foreign 1,131 1,453 -322 Partron (091700/Buy/TP: W10,800) Lower TP Institutional 788 633 155 In need of a breakthrough Retail 2,579 2,445 135 Korean Air (003490/Buy/TP: W50,000) Lower TP Three potential catalysts KOSDAQ Turnover (Wbn) Buy Sell Net KH Vatec (060720/Trading Buy/TP: W20,300) Downgrade rating & Lower TP Foreign 182 255 -73 The worst is over Institutional 196 176 20 AmoreG (002790/Hold) Downgrade rating Retail 2,581 2,519 63 Robust growth continues, driven by operating subsidiaries Program Buy / Sell (Wbn) Daum Kakao (035720/Buy/TP: W170,000) Raise TP Buy Sell Net Attractive in spite of high P/E KOSPI 950 1,158 -209 LG Corp. ((003550/Buy/TP: W90,000) KOSDAQ 76 57 19 Conditions for a rebound Advances & Declines Samsung Securities (016360/Buy/TP: W92,000) Advances Declines Unchanged Attractive entry point KOSPI 282 526 58 Humax (115160/Buy/TP: W24,300) KOSDAQ 300 737 46 Market environment and F/X turning favorable KOSPI Top 5 Most Active Stocks by Value (Wbn) Hanwha Life (088350/Trading Buy/TP: W9,600) Loss ratio declines, but new risks emerging Price (W) Chg (W) Value Schnell 7,890 330 318 Shinsegae International (031430/Hold) Biopharmaceuticals Mixture of positives and negatives Samsung Electronics 1,104,000 -36,000 253 Hynix 35,650 -1,250 138 Sector News & Analysis Mirae 445 70 113 Healthcare (Overweight) KODEX LEVERAGE 9,420 -160 113 Healthcare Weekly Briefing

Economy & Strategy Update KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Fixed Income Weekly Lowered policy expectations to offer buying opportunities Wemade 64,800 8,200 111 Daum Communications 137,100 -3,000 101 FINETEK 17,100 -3,900 86 Webzen 33,500 -1,100 72 ISPLUS 6,150 30 68 Note: As of August 17, 2015 This document is a summary of a report prepared by Daewoo Securities Co., Ltd. (“Daewoo”) and published on our website. Please review the compliance notices contained in the original report. Information and opinions contained herein have been compiled in good faith from sources deemed to be reliable. However, the information has not been independently verified. Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy or completeness of the information and opinions contained in this document. Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for informational purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed or published in whole or in part for any purpose.

YG Entertainment (122870 KQ) Artist activities and new businesses to gain momentum in 2H

Entertainment 2Q review: OP misses, but net profit beats For 2Q, YG Entertainment reported consolidated revenue of W45.2bn (+35.4% YoY), Results Comment operating profit of W5bn (+4.2% YoY) and net profit of W11.6bn (+186.9 % YoY). August 17, 2015 Operating profit was weaker than anticipated, but net profit was well above expectations.

Despite increased revenue QoQ, operating profit slipped QoQ, hurt by 1) weaker royalty (Maintain) Buy income from Japan due to the absence of concerts, and 2) higher revenue mix of subsidiaries, which remained burdened by heavy expenses related to new businesses. On Target Price (12M, W) 72,000 the non-operating side, the company gained W9.8bn from the disposal of Coson shares. Subsidiary YG Plus, which was consolidated in December 2014, recorded a slightly Share Price (08/13/15, W) 59,500 smaller operating loss QoQ on the back of top-line growth (vs. loss of W1.4bn in 1Q).

Expected Return 21% 2H outlook: Big Bang world tour and album releases by Psy and new groups

We see several positive earnings catalysts ahead in 2H. Big Bang’ s 2015 world tour, which kicked off on April 25th, is expected to attract more than 1.4mn concertgoers in OP (15F, Wbn) 30 70 concerts across 15 countries. In 3Q, the group is scheduled to tour Southeast Asia Consensus OP (15F, Wbn) 31 (Bangkok, Singapore, and Manila) and other regions, including the US. Meanwhile, world- EPS Growth (15F, %) 69.9 renown Psy is expected to release his latest album in 2H. We also look for more Market EPS Growth (15F, %) 28.2 activities from new artists Winner and iKON and the debut of a new girl group in 2H. P/E (15F, x) 27.1 Market P/E (15F, x) 11.0 Maintain Buy and Lift TP to W72,000 on 2015F EPS revision KOSDAQ 731.36 We expect YG Entertainment’s stock to move higher in 2H, bolstered by a number of positive catalysts (earnings, new business and new artists). We revised up our 2015F EPS Market Cap (Wbn) 896 by 21.1% to account for the non-operating profit gain revealed in the 2Q results and Shares Outstanding (mn) 16 accordingly raise our target price on the stock to W72,000 (from W60,000). Free Float (%) 63.8 Foreign Ownership (%) 6.6 The company should begin to recognize more meaningful revenue from Big Bang’ s Beta (12M) 1.06 world tour in 3Q, which will likely drive overall earnings improvements. The company 52-Week Low 38,600 could also benefit from the potential strengthening of the yen, given that the company 52-Week High 59,500 derived 33% of its revenue from Japan in 1H15.

(%)(%)(%) 1M1M1M 6M6M6M 12M12M12M YG Entertainment controls the largest share of the domestic digital music market Absolute 28.6 29.9 27.7 (22.7% in 2014). The company’s artists are already well recognized for their music in the Relative 31.8 8.0 -3.7 domestic and overseas markets. The Chinese government’s recent move to crack down

160 YG Entertainment KOSDAQ on unlicensed streaming is also a major positive.

140 Among the company’s various new initiatives (fashion, restaurants, model agency, etc. ),

120 the most highly anticipated is its cosmetics brand, Moonshot. In 2Q, LVMH’s global beauty retailer Sephora began ca rrying the brand in its stores in Asia (11 stores in 100 Singapore and 14 stores in Malaysia). YG Entertainment plans to focus on increasing the 80 brand’s recognition for now and begin supplying to Chinese retailers in 4Q. 8.14 12.14 4.15 8.15

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 107 116 156 192 275 322 [Internet/Game/Entertainment] OP (Wbn) 21 22 22 30 44 51

Chang-kwean Kim OP margin (%) 19.6 19.0 14.1 15.6 16.0 15.8 +822-768-4321 NP (Wbn) 19 15 19 36 37 42 [email protected] EPS (W) 1,381 1,116 1,290 2,192 2,227 2,558 ROE (%) 21.6 14.8 13.4 18.6 16.2 16.1 Jeong-yeob Park +822-768-4124 P/E (x) 33.3 34.9 34.3 27.1 26.7 23.3 [email protected] P/B (x) 6.5 4.9 4.1 4.7 4.0 3.5 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Osstem Implant (048260 KQ) Continued domestic growth and overseas turnaround ahead

Healthcare 2Q review: In-line operating profit; Net profit significantly beats For 2Q, Osstem Implant announced non-consolidated revenue of W48.9bn (+14.4% Results Comment YoY), operating profit of W9.4bn (+53.0% YoY), and net profit of W8.9bn (+2,672.6% August 17, 2015 YoY). Net profit including equity-method profits and losses soared to an estimated W8.5bn (+5,920.7% YoY) . Both revenue and operating profit were in line with our

estimates, while net profit and net profit including equity-method profits and losses (Maintain) Buy were far better than our expectations. Domestic revenue and exports expanded to W34.3bn (+10.0% YoY) and W14.6bn Target Price (12M, W) 79,000 (+26.5% YoY), respectively. By product, revenue was W31.6bn (+22.0% YoY) for d ental implants (including both domestic sales and exports) and W4.1bn (-4.7% YoY) for dental Share Price (8/13/15, W) 61,000 chairs (domestic sales only).

Expected Return 30% OP mar gin improved markedly YoY to 19.2% (+4.8%p YoY), driven by increased sales of implants (which are highly profitable) and solid sales of dental chai rs. Meanwhile,

retirement benefits of W2bn were booked in 2Q. OP (15F, Wbn) 45 Consensus OP (15F, Wbn) 45 The dramatic YoY increase in net profit was p rimarily attributable to F/X gains of W1.7bn and a low base effect. (F/X losses of W4bn were recorded in 2Q14.) EPS Growth (15F, %) 68.2 Market EPS Growth (15F, %) 28.2 Overseas subsidiaries recorded combined revenue of W35.6bn (+23.4% YoY) and an P/E (15F, x) 24.4 equity-method net loss of W0.6bn (remaining in red YoY). The US subsidiary posted Market P/E (15F, x) 11.0 revenue of W8.5bn (+5.3% YoY) and a net loss of W0.2bn (remaining in red YoY). The KOSDAQ 731.36 China subsidiary (including Osstem South China) posted revenue of W13.6bn (+38.1% Market Cap (Wbn) 871 YoY) and a net loss of W0.1bn (remaining in red YoY) . Overall, overseas profits were Shares Outstanding (mn) 14 weighed down by higher labor costs due to increased head count. Still, we note that Free Float (%) 79.1 top-line growth at overseas subsidiaries has been gaining traction since 4Q14. Foreign Ownership (%) 38.6 Domestic growth to continue; Overseas subsidiaries to turn around Beta (12M) 0.76 52-Week Low 33,450 Domestic dental implant revenue should continue to grow on the back of insurance 52-Week High 70,100 coverage expansion, driving margin improvement.

(%)(%)(%) 1M1M1M 6M6M6M 12M12M12M Overseas subsidiaries should generate a net profit in 4Q, as increased staffing should Absolute -1.9 27.7 82.4 begin to have a meaningful impact on revenue growth in 2H. Relative 0.5 6.2 37.6 Reiterate Buy and Raise TP to W79,000 230 Osstem Implant KOSDAQ We maintain Buy on Osstem Implant and raise our target price to W79,000 (from

180 W77,000), reflecting our upward earnings forecast revisions. We remain bullish on the company, in light of 1) the benefits from the dental implant insurance coverage 130 expansion, 2) expected market share gains domestically and overseas, and 3) positive F/X effects. 80 8.14 12.14 4.15 8.15

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 151 156 172 196 226 263 [Healthcare] OP (Wbn) 31 29 34 45 55 68

Hyun-tae Kim OP margin (%) 20.5 18.6 19.8 23.0 24.3 25.9 +822-768-3251 NP (Wbn) 17 18 21 36 40 48 [email protected] EPS (W) 1,198 1,274 1,484 2,496 2,774 3,360 ROE (%) 19.9 16.9 16.7 23.1 20.7 20.4 Seung-min Kim +822-768-4157 P/E (x) 23.9 18.1 24.0 24.4 22.0 18.2 [email protected] P/B (x) 4.1 2.8 3.7 5.1 4.1 3.4 Note: All figures are based on non-consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates

AmorePacific (090430 KS) Proven market leadership

Cosmetics 2Q15 review: OP of W208.1bn (+38% YoY), in line with our estimate For 2Q, AmorePacific announced preliminary consolidated revenue of W1.2tr (+23.7% Results Comment YoY), and operating profit of W208.1bn (+37.7% YoY; OP margin of 17.4%). Despite an August 17, 2015 unfavorable external environment, the company delivered solid earnings that were broadly in line with our expectations (revenue and operating profit were respectively

2.6% and 0.7% ahead of our estimates). (Maintain) Buy Domestic cosmetics revenue continued strong growth in 2Q, rising 19.4% YoY. Despite the negative impact of MERS, revenue from the duty-free shop channel expanded a Target Price (12M, W) 540,000 robust 55.8% YoY, outpacing the overall domestic duty-free market, which grew only 6.9% YoY during the period. This strong performance confirms that the secular trend of Share Price (08/13/15, W) 378,000 increasing preference for AmorePacific brands remains intact.

Expected Return 43% Overseas revenue continued to set a new record, climbing 45.9% YoY to W277.7bn. The overseas business has continued quarterly growth regardless of seasonality , as a result

of increasing reputation of the company’s major brands and the effects of new store OP (15F, Wbn) 802 openings. In China, the number of stores increased 241 QoQ, largely because the year- Consensus OP (15F, Wbn) 829 long channel restructuring for the brand Mamonde came to an end. The company also EPS Growth (15F, %) 56.2 launched the brand IOPE in China, further diversifying its brand portfolio in the country. Market EPS Growth (15F, %) 28.2 Strong overseas growth potential in the medium and long term P/E (15F, x) 44.1 Market P/E (15F, x) 11.0 On an annual basis, we expect overseas revenue to grow 38% YoY in 2015 and 49% in KOSPI 1,983.46 2016. The reason we see faster growth in 2016 is because more aggressive store openings are expected next year. Market Cap (Wbn) 22,097 Shares Outstanding (mn) 69 AmorePacific started to make inroads overseas in the early 2000s, but the company has Free Float (%) 50.6 begun making a more aggressive push this year. Consumer interest in cosmetics brands Foreign Ownership (%) 30.3 is critical for brands to successfully take hold. We believe foreign consumers began Beta (12M) 1.98 taking interest in AmorePacific’s brands and the Korean cosmetics industry in general in 52-Week Low 202,900 2012. We think 2015 will mark the beginning of AmorePacific’s global growth story, and 52-Week High 445,000 in the long term, the company should deliver even stronger growth overseas than it ever (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M has domestically. Absolute -5.0 31.3 82.8 Unrivaled leader of the Korean cosmetics industry Relative -1.3 29.5 90.1 The domestic cosmetics industry recorded a net export position for the first time in

280 AmorePacific KOSPI 2013. We believe AmorePacific’s role as an industry leader will increase even further in 230 the upcoming export growth phase of Korea’s cosmetics industry. We maintain our Buy

180 call and target price of W540,000 and continue to recommend the stock as our top pick in cosmetics. 130

80 8.14 12.14 4.15 8.15

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 2,849 3,100 3,874 4,848 6,509 8,576 [Cosmetics, Hotel/Leisure, Fashion] OP (Wbn) 365 370 564 802 1,103 1,477

Regina Hahm OP margin (%) 12.8 11.9 14.6 16.5 16.9 17.2 +822-768-4172 NP (Wbn) 270 268 379 592 801 1,078 [email protected] EPS (W) 3,918 3,883 5,493 8,579 11,606 15,622 ROE (%) 12.1 11.0 14.0 19.2 21.7 23.7

P/E (x) 31.0 25.8 40.4 44.1 32.6 24.2 P/B (x) 3.6 2.7 5.4 7.8 6.4 5.2 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Kiwoom Securities (039490 KS) ROE rises to 27%, driven by core earnings and subsidiaries

Securities 2Q review: Pretax profit of W87.1bn (+16.1% QoQ); ROE of 27.1% Kiwoom Securities announced 2Q pretax profit of W87.1bn (+16.1% QoQ) , handily Results Comment beating our expectations (W48.2bn). The 2Q results marked the company’s best August 17, 2015 performance since the introduction of margin regulations in 2007 . Quarterly ROE rose to 27.1%.

Despite a high base of comparison in 1Q, trading income fell only modestly QoQ. (Maintain) Buy Moreover, t he decline in trading income was more than offset by an increase in brokerage commissions. Interest income also grew 7% QoQ, dispelli ng worries over the Target Price (12M, W) 96,000 potential impact of the new daily stock price movement limits. The company’s subsidiaries also performed well in 2Q. In particular, the savings bank more than halved Share Price (8/13/15, W) 62,400 its loss provisions, leading to a meaningful recovery in profitability. The quality of the 2Q earnings was better than that of 1Q results, because the earnings Expected Return 54% surprise this time was driven by core earnings and subsidiaries.

Strong core earnings power and diversified profit structure OP (15F, Wbn) 260 One recent change worth noting is the diversification of Kiwoom’s profit structure . 1) Consensus OP (15F, Wbn) 203 The firm’s stock lending pool has expanded by nearly W2tr. As such, stock lending EPS Growth (15F, %) 165.8 income should begin to contribute to operating profit in 2H. 2) Newly acquired Market EPS Growth (15F, %) 28.2 subsidiaries are now back on track and should add around W30bn to annual operating P/E (15F, x) 6.9 profit based on conservative estimates (W18bn from savings bank and W12bn from Market P/E (15F, x) 11.0 asset management). 3) Trading income should remain steady, as the firm has relatively KOSPI 1,983.46 limited bond exposure compared to other brokerage companies.

Market Cap (Wbn) 1,379 The 2Q earnings season has shown differentiated performances among brokerage firms Shares Outstanding (mn) 22 based on earnings diversification and competitiveness in prop trading. Kiwoom Free Float (%) 51.8 Securities stands out on both fronts. Foreign Ownership (%) 30.3 Maintain Buy and TP of W96,000; Excessively undervalued Beta (12M) 1.95 52-Week Low 43,650 Lately, Kiwoom Securities has been attracting new customers at an accelerating rate. 52-Week High 84,300 Despite the firm’s reliance on offline banks for account opening, average daily new accounts hit a record high of 1,800 in 2Q. New customer inflow should further gain pace (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M in 2016, once identity verification is allowed to be conducted online. In a broader sense, Absolute -11.9 9.5 24.8 removing the current physical identity verification method will eliminate the firm’s last Relative -8.4 8.0 29.8 remaining obstacle to becoming a pure online firm.

200 Kiwoom Securities KOSPI At a P/B of around 1.3x, the stock looks excessively cheap compared with its above-20% 180 ROE. Given the risk-free rate of less than 2% and the firm’s low-risk profit structure, we 160 think applying a cost of equity (COE) of 7% would be reasonable . This would put fair P/B 140 at 3x, which is more than double the stock’s current multiple. We maintain our Buy call 120 and target price of W96,000 and reiterate the stock as one of our top picks in securities. 100 80 8.14 12.14 4.15 8.15 FY (Dec.) 3/13 12/13 12/14 12/15F 12/16F 12/17F Net operating revenue (Wbn) 229 189 300 474 410 423 Daewoo Securities CCo.,o., Ltd. OP (Wbn) 63 54 100 260 197 209 NP (Wbn) 51 36 76 201 149 158 [Securities/Insurance] EPS (W) 2,329 1,640 3,420 9,090 6,739 7,143

Gil-won Jeong BPS (W) 37,861 38,413 41,500 50,511 54,356 58,432 +822-768-3256 P/E (x) 29.4 30.8 13.5 6.9 9.3 8.7 [email protected] P/B (x) 1.8 1.3 1.1 1.2 1.1 1.1

Ju-hyun Kim ROE %) 6.0 4.2 8.6 19.7 12.8 12.6 +822-768-4149 Dividend yield (%) 0.7 0.7 1.0 1.9 2.1 1.8 [email protected] Stockholders’ equity (Wbn) 861 855 924 1,124 1,209 1,300

Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests, 12/13 figures are based on 9-month period

Source: Company data, KDB Daewoo Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURESDISCLOSURES & DISCLAIMERS IN APPENDIX 1 AATT THE END OF REPORT.

Hanwha Corp. (000880 KS) Uncertainties to ease

Holding Companies 2Q OP tops consensus, but NP attributable to controlling interests disappoints Hanwha Corp. announced 2Q revenue and operating profit of W9.69tr (+5.3% YoY) and Results Comment W414.3bn (turning to profit YoY), respectively. Revenue was in line with consensus, but operating profit beat thanks to solid earnings from in-house businesses and subsidiaries August 17, 2015 Hanwha Life and Hanwha Chemical. That said, net profit attributable to controlling interests came in at a weaker-than-expected W15.4bn (turning to profit YoY) due to the sluggish performances of Hanwha E&C and other subsidiaries in which the company (Maintain) Buy owns high stakes. 1) Hanwha Corp.’s in-house businesses recorded revenue of W1.34tr (+20.9% YoY) and Target Price (12M, W) 60,000 operating profit of W59.5bn (+242.2% YoY). The strong revenue growth YoY was attributable to the consolidation of Hanwha TechM (October 1, 2014). T he Share Price (8/13/15, W) 42,500 manufacturing unit posted operating profit of W65.3bn (+376.3% YoY) and OP margin of 12.5% (+6.3%p YoY), driven by the defense segment, where operating profit surged Expected Return 41% 298.9% YoY to W54.7bn (TechM operating profit grew 6% YoY to W10.6bn). The trading unit sustained an operating loss of W5.7bn (turning to loss YoY), as revenue remained weak due to unfavorable trade conditions.

OP (15F, Wbn) 1,349 2) As for subsidiaries, Hanwha Life and Hanwha Chemical performed well, but Hanwha Consensus OP (15F, Wbn) 1,076 E&C and Hanwha Hotels & Resorts reported deteriorated earnings. Hanwha Life was boosted by expense savings, higher investment yield, and cost efficiency, while Hanwha EPS Growth (15F, %) - Chemical benefited from wider spreads and the solar PV business’s return to Market EPS Growth (15F, %) 28.2 profitability. On the other hand, Hanwha Hotels & Resorts suffered an opera ting loss of P/E (15F, x) 20.2 W7.4bn, weighed down by weaker revenue (due to the MERS outbreak) and property Market P/E (15F, x) 11.0 taxes. Despite the smooth implementation of the Iraqi housing projects, Hanwha E&C KOSPI 1,983.46 performed poorly in 2Q, hurt by roughly W100bn in cost overruns resulting from pr oject delays in the Middle East (Marafiq, Yanbu 2, etc.). Market Cap (Wbn) 3,186 Shares Outstanding (mn) 75 Maintain Buy and TP of W60,000 Free Float (%) 56.1 We keep our Buy rating and target price of W60,000 on Hanwha Corp. The company’s stock Foreign Ownership (%) 26.8 has pulled back on worries over the size of Hanwha E&C’ s additional losses in the Middle East. Beta (12M) 1.41 We believe the construction company has now recognized most of its potential losses 52-Week Low 25,900 related to troubled projects and thus think any further losses will be limited. Overseas 52-Week High 52,200 uncertainties should ease on the completion of problematic projects in 2H.

(%)(%)(%) 1M1M1M 6M6M6M 12M12M12M Meanwhile, Hanwha Corp. recently entered into agreements with Hanwha Life, Hanwha Absolute -15.0 57.1 57.1 General Insurance, Hanwha Chemical, and Hanwha E&C to license the Hanwha brand Relative -11.7 55.1 63.4 name from July 1, 2015 to December 31, 2016. The deal is expec ted to bring in annual revenue of more than W63.2bn. Furthermore, we believe the company could also sign

230 Hanwha Corp. KOSPI licensing deals with new affiliates Hanwha General Chemicals, Hanwha Total, Hanwha Techwin, and Hanwha Thales. (The former two were officially integrat ed on May 1, 2015 180 and the latter two on June 29, 2015.) Such brand licensing deals should significantly improve Hanwha Corp.’s cash flow. 130 The defense business should benefit from seasonal peak effects in 2H, as well as from

80 the recent acquisition of Hanwha Techwin, which should drive synergies and bolster 8.14 12.14 4.15 8.15 top-line growth.

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/11 12/12 12/13 12/14 12/15F 12/16F Revenue (Wbn) 12,186 35,652 38,725 37,457 39,229 41,879 [Holding Companies/IT Services] OP (Wbn) 307 1,226 864 516 1,349 1,283

Dae-ro Jeong OP margin (%) 2.5 3.4 2.2 1.4 3.4 3.1 +822-768-4160 NP (Wbn) 135 287 130 -364 160 261 [email protected] EPS (W) 1,783 3,799 1,723 -4,831 2,104 3,465 ROE (%) 3.6 6.4 3.0 -8.4 3.5 5.4 Yoon-seok Seo +822-768-4127 P/E (x) 18.6 9.0 22.7 - 20.2 12.3 [email protected] P/B (x) 0.5 0.6 0.7 0.5 0.7 0.6 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Soulbrain (036830 KQ) Earning stability has been restored

Technology 2Q15 review: Earnings remain stable Soulbrain announced 2Q consolidated revenue of W145.2bn (+8.9% YoY, +2.8% QoQ), Results Comment and operating profit of W22.7bn (+236.0% YoY, +6.2% QoQ), with the latter figure in August 17, 2015 line with the market consensus. Despite sluggish smartphones sales of the company ’s largest customer, overall earnings remained stable thanks to solid revenue from the

semiconductor materials business. (Maintain) Buy Thin glass (TG) revenue declined QoQ, affected by weaker shipments to the business’s largest customer. However, contrary to worries, operating loss was not as la rge as in Target Price (12M, W) 60,000 previous quarters, owing to the organizational restructuring carried out in 3Q14. While worries about the TG business remain high, we believe the increasing adoption of OLED Share Price (08/13/15, W) 44,150 in smartphones worldwide and efforts by the company’s largest customer t o broaden the application of OLEDs to low/mid-end models will provide some downside support to Expected Return 36% earnings.

Look past worries over TG unit OP (15F, Wbn) 95 Consensus OP (15F, Wbn) 92 1) Full-fledged growth of semiconductor materials: We expect semiconductor material shipments to continue to expand in 2H, backed by the full-scale operations of Samsung EPS Growth (15F, %) 109.1 Electronics’ (SEC) 3D V-NAND fab in Xi’an and line 17. In particular, 3D V-NAND is Market EPS Growth (15F, %) 28.2 positive to Soulbrain’s top-line growth because it requires more etchants than previous P/E (15F, x) 9.0 processes. Given the continued semiconductor capex of the company’s major customer , Market P/E (15F, x) 11.0 we believe semiconductor materials will continue to drive overall growth in 2016. KOSDAQ 731.36 2) Positive outlook for display materials in 2H: Concerns over the TG business, which had Market Cap (Wbn) 731 been Soulbrain’s main driver during the past three years, have further heightened due to Shares Outstanding (mn) 17 the expansion of flexible display models by the company’s largest customer. However, Free Float (%) 53.1 we believe last year’s restructuring will provide some support. We also note that the Foreign Ownership (%) 29.4 percentage of TG out of overall revenue has fallen to the 10% level (vs. previous peak of Beta (12M) 0.71 52-Week Low 23,200 40%). We also see a strong chance of etchant supply to a new customer in 2H. Overall, 52-Week High 51,300 we anticipate display material earnings to improve in 2H.

(%)(%)(%) 1M1M1M 6M6M6M 12M12M12M Retain Buy and TP of W60,000; Semiconductor materials to gain traction in 2H Absolute -7.5 21.5 44.3 We reiterate our Buy call and target price of W60,000 on Soulbrain. Our target price Relative -5.3 1.0 8.8 corresponds to a 12-month forward P/E of 13.8x (global peer average). The stock currently trades at a P/E of 9.0x and P/B of 1.5x. We believe earnings will improve in 2H, 180 Soulbrain KOSDAQ 160 driven by the semiconductor materials business, which should continue to grow in 2016 140 on the back of the full-fledged operation of SEC’s 3D V-NAND fab. With TG now 120 accounting for a much smaller portion of revenue, we believe the company’s 100 semiconductors materials business deserves greater attention than the TG business. 80 60 8.14 12.14 4.15 8.15

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 664 635 539 600 648 700 [Display/IT Materials] OP (Wbn) 107 88 48 95 104 119

Young Ryu OP margin (%) 16.1 13.9 8.9 15.8 16.0 17.0 +822-768-4138 NP (Wbn) 74 62 38 81 90 103 [email protected] EPS (W) 4,631 3,844 2,336 4,884 5,460 6,234 ROE (%) 26.4 17.3 9.4 17.6 16.9 16.5 Chuljoong Kim +822-768-4162 P/E (x) 10.1 11.6 13.8 9.0 8.1 7.1 [email protected] P/B (x) 2.3 1.8 1.2 1.5 1.3 1.1 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Next Entertainment World (160550 KQ) New title and China momentum awaits in 2H

Media 2Q15 review: Return to non-consolidated profit Under non-consolidated IFRS, Next Entertainment World (NEW) swung to an operating Results Comment profit in 2Q, after recording four straight quarters of losses. August 17, 2015 Revenue: 2Q revenue grew 66% YoY and 22% QoQ, as revenue increased in both the film distribution and copyright distribution segments on the back of a strong lineup, which included the movies Twenty (released on March 25 th ) and Northern Limit Line (Maintain) Trading Buy th (released on June 24 ).

Target Price (12M, W) 17,000 Expenses: Despite the QoQ rise in revenue, COGS and SG&A expenses stayed flat QoQ. As such, operating profit returned to positive territory QoQ and YoY. In 1H15, labor , Share Price (08/13/15, W) 14,700 depreciation, amortization, and commission expenses increased YoY, but the overall expense increase was limited thanks to declines in write-downs, supply expenses, and Expected Return 16% taxes and dues.

Profitability to continue in 2H; Rising expectations on new titles and China OP (15F, Wbn) 7 We expect NEW to continue to deliver a profit in 3Q and 4Q, as the company has more Consensus OP (15F, Wbn) 7 films lined up in 2H than in 1H. In addition, around 70% of the box-office ticket and EPS Growth (15F, %) 101.6 performance sales for Northern Limit Line (which has so far sold around 6mn tickets) Market EPS Growth (15F, %) 28.2 will likely be recognized in 3Q. P/E (15F, x) 47.1 New titles: The film The Beauty Inside is set to hit theaters on August 20 th . Other titles Market P/E (15F, x) 11.0 set for release in 2H include The Phone , You Sound Like Passion, and The Great Tiger . KOSDAQ 731.36 Among the new titles, the film with the biggest budget is The Great Tiger , which once Market Cap (Wbn) 201 again brings together Park Hoon-jung, the director of New World , with the actor Choi Shares Outstanding (mn) 27 Min-sik. NEW’s first drama production Descendants of the Sun is also expected to air on Free Float (%) 60.5 KBS this year. The drama, which is written by Kim Eun-sook ( the writer of the hit series Foreign Ownership (%) 13.2 The Heirs ) and stars Song Hye-kyo and Song Joong-ki, has reportedly been pre sold to Beta (12M) 1.34 China for the highest price ever for a Korean drama. 52-Week Low 8,664 52-Week High 15,376 China business: In 2H, NEW is anticipated to establish a joint venture with the Chinese firm Huace Media, which is also its second-largest shareholde r. The company plans to (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M co-invest and mainly produce films and dramas via the joint venture. Absolute 6.9 28.7 0.0 Relative 9.6 7.0 0.0 Maintain Trading Buy, but Raise TP by 6% to W17,000

180 NEW KOSDAQ We lift our target price on NEW to W17,000 (from W16,000), as we revised up our 160 2015 earnings estimates in light of the positive 2Q results. We keep our Trading Buy call

140 for now, but plan to revisit our rating depending on the performance of the company’s

120 domestic lineup and pace of progression in China.

100 80 12.14 4.15

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 43 122 54 84 89 91 [Telecom Service / Media] OP (Wbn) 5 20 6 7 7 7

Jee-hyun Moon OP margin (%) 11.6 16.4 11.1 8.3 8.2 7.7 +822-768-3615 NP (Wbn) 5 12 4 9 9 9 [email protected] EPS (W) 325 690 155 312 318 310 ROE (%) 40.5 62.6 5.6 6.6 6.3 5.8

P/E (x) - - 58.4 47.1 46.2 47.4 P/B (x) - - 2.0 3.0 2.8 2.7 Notes: All figures are based on non-consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, includi ng the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Samsung Life (032830 KS) Heightened uncertainties over capital policy and interest rates

Insurance 2Q15 review: Net profit of W442.8bn (-9.4% YoY) Samsung Life’s 2Q net profit came in at W442.8bn (-9.4% YoY), well a head of our Results Comment estimate of W337.6bn. Stripping away a one-off tax refund (W136bn), net profit was in August 17, 2015 line with our expectation. Loss ratio markedly improved to 75.8% (-3.8%p QoQ, -2.6%p YoY), resulting in mortality profits of over W200bn. The insurer’s negative spread, which had continuously (Maintain) Buy expanded in the previous quarters, narrowed 3bps QoQ to 59bps in 2Q , helped by the reduction in crediting rates and the decrease in the mix of fixed-rate reserves . Target Price (12M, W) 128,000 Investment yield, however, fell to 3.53%, due to lower dividend income and disposal gains, but also as a result of a visibly lower yield on interest-bearing assets. Share Price (8/13/15, W) 99,700 Value of new business grew a mere 1.8% YoY in 1H, as lower interest rates and a fall in protection-type margins outweighed a 7.8% YoY increase in protection–type new Expected Return 28% business.

Two important capital policy events OP (15F, Wbn) 341 We believe two upcoming events will have important implications for the insurer’s Consensus OP (15F, Wbn) 482 capital policy. EPS Growth (15F, %) 5.8 First, the insurer plans to unveil its policy regarding overseas expansion and dividends Market EPS Growth (15F, %) 28.2 during its 3Q earnings release. With growth slowing in the domestic market , we believe P/E (15F, x) 14.1 it is only natural for the insurer to turn its eyes overseas. That said, such over seas Market P/E (15F, x) 11.0 expansion will likely reduce room for dividends, and it may take quite some time before KOSPI 1,983.46 the insurer starts to reap profits from its overseas investments. Market Cap (Wbn) 19,940 Meanwhile, regulators are expected to tighten liability adequacy test (LAT) Shares Outstanding (mn) 200 requirements. While the details remain uncertain, we believe regulators will implement Free Float (%) 45.9 mark-to-market valuation of liabilities ahead of the introduction of IFRS phase II and also Foreign Ownership (%) 18.2 establish se parate reserve guidelines by product type. This will undeniably prove Beta (12M) 1.05 unfavorable to large life insurers with heavy fixed-rate liabilities. Any shortfall in reserves 52-Week Low 94,800 will likely be made up by dividends and excess capital, reducing the cash distributable to 52-Week High 127,000 shareholders.

(%)(%)(%) 1M1M1M 6M6M6M 12M12M12M Wait until direction of interest rates and capital policy details are confirmed Absolute -4.6 -3.7 -3.7 Relative -0.8 -4.9 0.2 Given the potential for another base rate cut, investment gains are unlikely to improve any time soon. And in the long term, minimum guarant eed rates could put renewed

130 Samsung Life KOSPI pressure on negative spreads. The dividend outlook also remains unc ertain, given the 120 insurer’s likely capital policy revisions and expected tightening of LAT regulations.

110 We remain Buy on Samsung Life, but lower our target price to W128,000 (from 100 W134,000), reflecting the fall in the value of the insurer’s Samsung Electronics stake. 90

80 8.14 12.14 4.15 8.15 FY (Dec.) 03/13 12/13 12/14 12/15F 12/16F 12/17F Direct premiums (Wbn) 30,755 19,601 28,239 30,403 32,389 34,506 Daewoo Securities CCo.,o., Ltd. OP (Wbn) 532 134 568 341 308 107 NP (Wbn) 984 586 1,337 1,414 1,339 1,356 [Securities/Insurance] EPS (W) 4,922 2,932 6,687 7,072 6,693 6,779

Gil-won Jeong BPS (W) 108,652 98,183 111,424 121,042 130,193 139,545 +822-768-3256 P/E (x) 21.2 35.5 17.4 14.1 14.9 14.7 [email protected] P/B (x) 1.0 1.1 1.0 0.8 0.8 0.7

Ju-hyun Kim ROE (%) 4.9 2.8 6.4 6.1 5.3 5.0 +822-768-4149 Dividend yield (%) 1.4 0.8 1.5 1.5 1.5 1.5 [email protected] Stockholders’ equity (Wbn) 21,730 19,637 22,285 24,208 26,039 27,909

Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests, 12/13 figures are based on 9-month period

Partron (091700 KQ) In need of a breakthrough

Technology 2Q15 review: Disappointing OP of W6.2bn (-50.1% YoY, -55.6% QoQ) Partron’s 2Q revenue and operating profit came in at W184.7bn (+20.0% YoY, -8.4% Results Comment QoQ) and W6.2bn (-50.1% YoY, -55.6% QoQ), respectively. Revenue was broadly in line August 17, 2015 with our estimate (W179.1bn), but operating profit missed our projection (W11.5bn) by 45.8%. OP margin declined 4.7%p YoY to 3.4%.

We believe the disappointing consolidated margin was primarily due to losses at (Maintain) Buy overseas production subsidiaries (Yantai Partron Electronics and Partron VINA) , given that non-consolidated revenue and operating profit were, respectively, W173.9bn and Target Price (12M, W) 10,800 W11.4bn. Overseas subsidiaries were hit hard by 1) losses related to facility closure resulting from relocation of manufacturing from China to Vietnam, and 2) higher fixed Share Price (08/13/15, W) 8,760 costs due to top-line contraction.

Expected Return 23% For 3Q, we forecast revenue and operating profit to improve to W222.3bn (+28.3% YoY, +20.4% QoQ) and W14.5bn (+17.6% YoY, +132.0% QoQ), respectively, helped by t he

release of new smartphone models by the company’s biggest customer. While any OP (15F, Wbn) 53 strong recovery is unlikely given the weakness of downstream industries, the worst Consensus OP (15F, Wbn) 64 appears to be largely over. EPS Growth (15F, %) -10.0 New businesses slow to take off Market EPS Growth (15F, %) 28.2 P/E (15F, x) 10.9 The biggest determinant of Partron’s earnings is Samsung Electronics’s (SEC) Market P/E (15F, x) 11.0 smartphone business. SEC’s smartphone shipments are unlikely to recover sharply, as KOSDAQ 731.36 the company is struggling to keep up with Apple on the high end, while dealing with Chinese manufacturers on the low end. SEC’s struggles are likely to spill over to Market Cap (Wbn) 474 component makers. Indeed, most smartphone component suppliers reported poor Shares Outstanding (mn) 54 earnings in 2Q. Free Float (%) 72.9 Foreign Ownership (%) 15.3 Despite challenging market conditions, Partron has maintained relatively stable Beta (12M) 0.88 earnings. We could see earnings gradually improve as camera modules become more 52-Week Low 7,700 advanced. 16MP is becoming the norm for rear-facing cameras, while an increasing 52-Week High 15,200 number of smartphones are adopting optical image stabilization (OIS). Such positive (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M developments could offset the fall in ASP. Absolute 9.1 -28.8 -2.7 The main concern is the company’s disproportionate exposure to camera modules . The Relative 11.8 -40.8 -26.6 company’s new businesses (i.e. sensors) have so far been slow to take off, accounting for

190 Partron KOSDAQ only 5% of overall revenue. In our view, the company needs to adopt a more aggressive 170 growth strategy. 150 130 Maintain Buy, but Trim TP to W10,800 110 We remain Buy on Partron, but lower our target price by 3.6% to W10,800 (from 90 W11,200), reflecting our earnings revisions. We derived our target price by applying a 70 8.14 12.14 4.15 8.15 P/E of 10x (unchanged) to our 12-month forward EPS of W1,081.

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 873 1,100 770 850 1,012 1,152 [Telecom equipment/Electronic OP (Wbn) 91 135 66 53 72 84 components] OP margin (%) 10.4 12.3 8.6 6.2 7.1 7.3

Wonjae Park NP (Wbn) 72 106 48 44 66 75 +822-768-3372 EPS (W) 1,333 1,956 894 804 1,219 1,388 [email protected] ROE (%) 43.3 44.2 16.3 13.7 18.8 18.5

P/E (x) 10.5 7.3 13.1 10.9 7.2 6.3 P/B (x) 3.9 2.7 2.0 1.4 1.2 1.1 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he U.S.

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Korean Air (003490 KS) Three potential catalysts

Airlines 2Q15 review: Yields hold up well, but earnings sharply miss due to one-offs Korean Air reported 2Q revenue of W2.79tr (-3.8% YoY). International passenger and Results Comment cargo yield fell 17.5% YoY and 16.4% YoY, respectively. Given that roughly 7% was due August 17, 2015 to F/X, we believe yields held up relatively well, as the long-haul passenger and cargo segments were less affected by the MERS outbreak.

The airliner recorded a 2Q operating loss of W2.6bn, far worse than the market (Maintain) Buy consensus (OP of W84.5bn). This was in large part due to one-off factors (W60bn) , including 1) real estate and property taxes (W17bn), 2) retirement provisions and Target Price (12M, W) 50,000 retroactive wage increases (W22bn), and 3) a temporary uptick in maintenance expenses (W20bn). Share Price (08/13/15, W) 36,250 The aerospace unit performed strongly in 2Q, posting revenue of W231.2bn (+20.4% YoY), and operating profit of W28.5bn (+337.2% YoY; OP margin of 12.3%). The unit’s Expected Return 38% 1H operating profit totaled W87.7bn, already nearing the 2014 full-year figure (W93.3bn). OP (15F, Wbn) 666 On the non-operating side, F/X losses of W163bn and net interest expenses of W80.5bn Consensus OP (15F, Wbn) 747 (-31.7% YoY) contributed to a net loss of W168.4bn. Interest expenses declined visibly, due to the repayment (through proceeds raised from equity issue and sale of S-Oil EPS Growth (15F, %) - shares) and refinancing of US$500mn in debt. Market EPS Growth (15F, %) 28.3 P/E (15F, x) - Three potential catalysts Market P/E (15F, x) 10.9 1) Long-haul demand pickup: Despite the MERS event, passenger demand on US and KOSPI 1,983.46 Europe routes has remained robust, driven by outbound traffic. Transit traff ic, however, Market Cap (Wbn) 2,640 is falling, but this is largely due to a temporary decline in demand from China . We Shares Outstanding (mn) 74 believe transit traffic could begin to pick up as early as August. Free Float (%) 60.6 2) Oil prices hitting critical mass: Given the recent slide in fuel prices, fuel surcharges Foreign Ownership (%) 18.4 could be suspended, potentially from October. If the current trend continues, pressures Beta (12M) 0.55 from falling surcharges will likely be eliminated from 4Q, slowing the decline in yield and 52-Week Low 31,823 accelerating the recovery of profits. 52-Week High 53,100 3) Aerospace business: With leverage effects gaining momentum on the back of strong (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M revenue growth, we think full-year operating profit could reach around W150bn. We Absolute -10.4 -22.2 13.7 see OP margin rising to 15 %, boosted by strong demand for components and margin Relative -6.9 -23.2 18.3 expansion of the unmanned aerial vehicle segment.

180 Korean Air KOSPI Maintain Buy, but Cut TP to W50,000 160 We reduced our 2015-16 operating profit forecasts by 16.4% and 6.1% , respectively, 140 and accordingly lowered our target price to W50,000 (from W55,000), which is based 120 on a mid-cycle P/B of 1.2x. In the near term, the stock is likely to remain under pressure. 100 However, we expect the stock to gradually bounce back, reflecting expectations of the 80 aforementioned catalysts. 8.14 12.14 4.15 8.15

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 12,342 11,849 11,910 11,812 12,502 12,424 [Transportation/Energy] OP (Wbn) 229 -20 395 666 930 964

Jay JH Ryu OP margin (%) 1.9 -0.2 3.3 5.6 7.4 7.8 +822-768-4175 NP (Wbn) 246 -225 -480 -136 466 615 [email protected] EPS (W) 3,189 -3,136 -7,625 -1,841 6,296 8,320 ROE (%) 9.7 -8.5 -20.3 -5.2 14.0 15.9 Choong-hyun Kim +822-768-4126 P/E (x) 13.2 - - - 5.8 4.4 [email protected] P/B (x) 1.2 0.7 1.4 0.9 0.8 0.6 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

KH Vatec (060720 KQ) The worst is over

Technology 2Q15 review: Operating loss of W2.8bn; First loss since 3Q11 For 2Q, KH Vatec reported revenue of W126.3bn (+8.0% YoY, -46.2% QoQ) and an Results Comment operating loss of W2.8bn (turning to loss YoY and QoQ), missing both our estimates August 17, 2015 (revenue of W201.9bn and OP of W9.6bn) and the consensus (revenue of W194.3bn and OP of W8.5bn) by wide margins. The latest result marked the company’s first

operating loss since 3Q11. (Downgrade) Trading Buy The poor performance was partly due to top-line contraction, resulting from 1) the weaker-than-anticipated smartphone sales of the company’s largest customer, 2) lower Target Price (12M, W) 20,300 pricing of components used in the customer’s flagship model, and 3) price reductions for existing components. Share Price (8/13/15, W) 18,000 Weaker overseas revenue also weighed on earnings. On top of the decline in revenue Expected Return 13% from overseas customers, the increased reliance on the company’s largest custome r (70% of overall revenue) is putting further pressure on profitability.

OP (15F, Wbn) 33 Earnings to gradually improve, but pace of pickup remains to be seen Consensus OP (15F, Wbn) 46 After reaching W518.9bn in 2009, KH Vatec’s annual revenue declined to around EPS Growth (15F, %) -1.4 W300bn during the following three years, primarily due to the troubles of Nokia, which Market EPS Growth (15F, %) 28.2 used to be the firm’s largest customer. In 2013, revenue temporarily shot up to P/E (15F, x) 13.9 W824.2bn, boosted by strong sales to BlackBerry. But as the smartphone maker Market P/E (15F, x) 11.0 slumped, revenue plunged again to W590bn in 2014 (around W100bn on a quarterly KOSDAQ 731.36 basis during 1Q-3Q14).

Market Cap (Wbn) 360 KH Vatec boasts superior die-casting technology, as evidenced by its diverse customer Shares Outstanding (mn) 20 list, which includes Samsung Electronics (SEC), Apple, Nokia, Motorola, Sony, BlackBerry, Free Float (%) 67.2 and HTC. The problem is that the company’s largest customer accounts for more than Foreign Ownership (%) 11.6 70% of overall revenue. In order for the company to reduce such overreliance, the Beta (12M) 0.78 smartphone sales of foreign customers, such as Nokia, Motorola, and BlackBerry, need 52-Week Low 15,500 to gain traction. Fortunately, we expect this to happen in 3Q15, but the pace of pickup 52-Week High 36,770 remains to be seen. (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M For 3Q, we project revenue at W189.1bn (+75.7% YoY, +49.7% QoQ) and operating Absolute 2.3 -39.4 14.9 profit at W10bn (+253.0% YoY, turning to profit QoQ). Relative 4.8 -49.6 -13.3

Downgrade to Trading Buy and Cut TP to W20,300 280 KH Vatec KOSDAQ We downgrade our rating on KH Vatec to Trading Buy and lower our target price by 230 18.8% to W20,300 (from W25,000) due to our earnings forecast revisions. We derived 180 our target price by applying a P/E of 10x (unchanged) to our 12-month forward E PS of 130 W2,033.

80 8.14 12.14 4.15 8.15

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 356 824 590 781 926 1,007 [Telecom equipment/Electronic OP (Wbn) 8 67 35 33 64 70 components] OP margin (%) 2.2 8.1 5.9 4.2 6.9 7.0

Wonjae Park NP (Wbn) -3 58 26 26 48 54 +822-768-3372 EPS (W) -160 2,907 1,309 1,291 2,404 2,683 [email protected] ROE (%) -1.7 26.9 10.2 9.3 15.7 15.3

P/E (x) - 7.0 25.7 13.9 7.5 6.7 P/B (x) 1.2 1.6 2.5 1.2 1.1 0.9 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he U.S.

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMDISCLAIMERSERS IN APPENDIX 1 AT THE END OF REPORT.

AmoreG (002790 KS) Robust growth continues, driven by operating subsidiaries

Cosmetics 2Q15 review: OP comes in line with consensus at W243.6bn (+41% YoY) For 2Q, AmoreG reported preliminary consolidated revenue of W1.41tr (+20.1% YoY) Results Comment and operating profit of W243.6bn (+41.4% YoY; OP margin of 17.2%), in line with August 17, 2015 market expectations. Compared to our estimates, revenue was short by 1.2%, while operating profit was 10.6% above.

Top-line growth was once again driven by operating subsidiaries Amorepacific and (Downgrade) Hold Innisfree. Despite an unfavorable environment, Innisfree delivered revenue growth of 26.5% YoY and an OP margin gain of 3.5%p YoY, underscoring the brand’s rapid growth Target Price (12M, W) - and increasing competitiveness across domestic and overseas markets.

Share Price (08/13/15, W) 188,500 Etude, which posted a profit in 1Q, swung to a small loss (W0.1bn) in 2Q, mainly due to channel restructuring of underperforming locations, especially in hypermarkets (a total Expected Return - of 29 stores were closed). In our view, the restructuring of low-growth channels is essential for the brand to improve its portfolio efficiency. Adjusting for store closures

and related expenses, we believe Etude’s overall profitability is improving full swing. OP (15F, Wbn) 898 Consensus OP (15F, Wbn) 966 Focus on growth potential of various operating subsidiaries

EPS Growth (15F, %) 22.1 AmoreG controls a number of cosmetics brands that operate as separate companies, Market EPS Growth (15F, %) 28.2 including Innisfree (brand shop), Etude (brand shop), Espoir (makeup), and Amos P/E (15F, x) 61.7 Professional (haircare). Market P/E (15F, x) 11.0 Among these brands, Amos Professional is experiencing rapid growth, strengthening the KOSPI 1,983.46 medium- and long-term case of operating subsidiaries together with Innisfree and Market Cap (Wbn) 15,041 Etude. Amos Professional’s revenue expanded 18.2% YoY in 2Q, even though the Shares Outstanding (mn) 89 haircare brand is only carried by specialty stores and some duty-free shops. We believe Free Float (%) 31.6 the brand is gaining increasing recognition in the haircare market, which has Foreign Ownership (%) 15.5 traditionally been dominated by foreign brands L’Oreal and Shiseido. Beta (12M) 1.73 52-Week Low 96,200 Downgrade to Hold; Discount to AmorePacific at historic low 52-Week High 208,000 The steadily growing competitiveness of AmoreG’s operating subsidiaries is indeed (%) 1M 6M 12M positive to the company’s medium- and long-term outlook. However, we estimate Absolute 2.4 41.6 84.4 AmorePacific accounts for 63% of AmoreG’s enterprise value and believe AmoreG’s Relative 6.5 39.8 91.8 current valuation is demanding even if AmorePacific’s value is fully reflected. We downgrade our rating on AmoreG to Hold in light of the limited upside to share prices. 280 AmoreG KOSPI

230

180

130

80 8.14 12.14 4.15 8.15

Daewoo Securities Co., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 3,432 3,895 4,712 5,773 7,537 9,673 [Cosmetics, Hotel/Leisure, Fashion] OP (Wbn) 450 470 659 898 1,097 1,344

Regina Hahm OP margin (%) 13.1 12.1 14.0 15.6 14.6 13.9 +822-768-4172 NP (Wbn) 155 163 222 271 331 401 [email protected] EPS (W) 1,742 1,834 2,501 3,054 3,729 4,511 ROE (%) 8.1 7.9 10.0 11.2 13.0 15.2

P/E (x) 26.8 25.4 39.9 61.7 50.6 41.8 P/B (x) 2.0 1.8 3.6 6.3 6.2 5.9 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Daum Kakao (035720 KQ) Attractive in spite of high P/E

Internet Dismal 2Q results Daum Kakao reported 2Q revenue of W226.5bn (-3.4% QoQ) and operating profit of Results Comment W11.4bn (-71.7% QoQ), missing the market consensus of W250.1bn for revenue and August 17, 2015 W47.3bn for operating profit. Revenue from the gaming platform KakaoGame, which has been a key re venue model for the company, plunged QoQ. In addition, growth in mobile ad revenue, including (Maintain) Buy revenue from Kakao Story, was slower than expected. The increase in marketing and content expenses related to new businesses also weighed on margins. Target Price (12M, W) 170,000 Growing expectations for new revenue models Share Price (08/13/15, W) 140,100 Concerns about deterioration in traditional revenue models based on KakaoTalk (such as KakaoGame) materialized in 2Q. However, 2Q results also boosted expectations for new Expected Return 21% revenue models.

Kakao Taxi, a taxi hailing app launched in March, is receiving good responses from both OP (15F, Wbn) 101 taxi drivers and users due to its convenience. In June, the company launched Kakao Consensus OP (15F, Wbn) 208 Channel and # search services, integrating an internet portal with mobile messenger EPS Growth (15F, %) -75.3 services. Market EPS Growth (15F, %) 28.2 P/E (15F, x) 92.7 High P/E to be sustained; Raise TP Market P/E (15F, x) 11.0 We revised our valuation formula for Daum Kakao, as the company’s new services are KOSDAQ 731.36 expected to bring about significant changes to people’s daily lives, just as KakaoTalk and KakaoGame did in the past. The compa ny’s innovative services have been benchmarked Market Cap (Wbn) 8,398 by major global players, including Tencent, Facebook, and LINE. Shares Outstanding (mn) 60 Free Float (%) 59.0 Daum Kakao’s taxi-hailing app has changed the way taxi services are provided and used. Foreign Ownership (%) 19.2 We expect this new type of service to contribute to better overall convenience and Beta (12M) 1.41 quality of life, just as designated driving and express courier services have. Online-only 52-Week Low 100,400 banks (to be introduced in 2H15) are also widely anticipated to have a significant impact 52-Week High 177,100 on the financial market in 2016 and beyond. (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M The internet service providers Amazon.com, Google, and Yahoo Japan have traded at Absolute 3.9 -0.8 -18.2 respective P/Es of over 100x, 20-40x, and 10-20x in recent years. Price multiples have Relative 6.5 -17.5 -38.3 varied widely depending on whether a firm manages to provide innovative services and

150 Daum Kakao KOSDAQ scalability, which are essential to expanding into new markets. 130 We maintain our Buy rating, and raise our target price from W130,000 to W170,000. In 110 deriving our target price, we applied a P/E of 60x, close to Amazon’s 2010 forward P/E. 90 We believe Daum Kakao has just entered an explosive growth stage, just as Amazon did 70 in 2010 with the release of the highly anticipated e-book reader Kindle. 50 8.14 12.14 4.15 8.15

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 453 211 499 954 1,190 1,353 [Internet/Game/Entertainment] OP (Wbn) 102 66 176 101 208 270

Chang-kwean Kim OP Margin (%) 22.5 31.3 35.3 10.6 17.5 20.0 +822-768-4321 NP (Wbn) 76 61 150 90 195 254 [email protected] EPS (W) 5,656 4,532 6,116 1,511 3,253 4,235 ROE (%) 15.7 17.7 11.4 3.6 7.4 8.9 Jeong-yeob Park +822-768-4124 P/E (x) 16.1 18.5 20.2 92.7 43.1 33.1 [email protected] P/B (x) 2.4 6.4 2.9 3.3 3.1 2.8 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

LG Corp. (003550 KS) Conditions for a rebound

Holding companies 2Q review: Robust equity-method gains; sluggish earnings of non-list ed subsidiaries Company Report LG Corp.’s 2Q results slightly exceeded the market consensus, with revenue of W2.42tr August 17, 2015 (+0.2% YoY) and an operating profit of W341.9bn (+18.7% YoY). Most notably, the company’s equity-method gains reached W258.5bn (+14.4% YoY ), which reflect earnings at most of its listed subsidiaries (e.g., LG Electronics (LGE), LG (Maintain) Buy Chem, and LG Uplus). In the quarter, its subsidiaries (excluding LGE) generated strong YoY earnings growth. Target Price (12M, W) 90,000 Meanwhile, earnings of non-listed subsidiaries displayed minimal gains . LG CNS, which is Share Price (08/13/15, W) 56,500 less reliant on captive customers than its competitors, reported a 85.7% YoY decline in operating profit (to W1bn), mainly affected by limited expansion into public-sector Expected Return 59% projects, as well as a decline in large-scale projects. LG Siltron’s revenue continued to erode amid fierce competition (and a resulting fall in sales price), but swung to an

operating profit YoY of W700mn thanks to improved cost efficiency (resulting from OP (15F, Wbn) 1,293 restructuring). Consensus OP (15F, Wbn) 1,281 Meanwhile, ServeOne delivered b oth improvements in top line and operating profit EPS Growth (15F, %) 22.8 (W30.6bn; +52.3% YoY ) on the back of solid captive customers. We expect the Market EPS Growth (15F, %) 28.2 subsidiary will continue to improve in light of opportunities from LG Group’s Magok P/E (15F, x) 9.6 Science Park project (a large-scale R&D complex). Market P/E (15F, x) 11.0 KOSPI 1,983.46 Investment strategy: Valuation to recover if electronics business recovers Market Cap (Wbn) 9,749 General investment points for holding companies are: 1) upside from rising value of Shares Outstanding (mn) 176 stakes in listed subsidiaries, 2) exposure to non-listed subsidiaries, and 3) positive Free Float (%) 51.4 attributes of holding company shares (e.g., brand royalty income, dividends, and Foreign Ownership (%) 30.0 transparent governance). Among these three, we believe LG Corp. meets the first Beta (12M) 0.75 point.LG group’s business portfolio includes electronics, chemicals, telecom and other 52-Week Low 53,100 services, with electronics (mainly LGE) responsible for 50% of revenue and operating 52-Week High 76,800 profit. As such, LG Corp.’s shares have been inextricably tied to the performance of the (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M electronics business, even in recent months despite a fall in the share of electronics in Absolute -0.2 -10.0 -18.5 the company’s NAV. Thus, a recovery in automotive electronic equipment and parts Relative 3.8 -11.2 -15.2 should help drive LG Corp.’s stock.

120 LG Corp. KOSPI Maintain Buy with TP of W90,000 110 We retain Buy with a target price of W90,000. Over the past three years, the stock has 100 90 invariably rebounded at a P/E of 10x, and at a 50% discount to NAV. At current levels, 80 we believe the stock is undervalued, and see a strong likelihood of sharply rebounding as 70 new growth drivers such as auto parts, energy and healthcare, led by electronics 60 business units, make progress and generate profits. 8.14 12.14 4.15 8.15

Daewoo Securities CCo.,o., Ltd. FY (12) 12/11 12/12 12/13 12/14 12/15F 12/16F Revenue (Wbn) 10,059 9,695 9,799 9,865 10,156 10,440 [Holding Companies/IT Services] OP (Wbn) 1,351 1,232 1,154 1,044 1,293 1,423

Dae-ro Jeong OP Margin (%) 13.4 12.7 11.8 10.6 12.7 13.6 +822-768-4160 NP (Wbn) 978 938 896 845 1,037 1,113 [email protected] EPS (W) 5,563 5,334 5,095 4,802 5,895 6,328 ROE (%) 9.6 8.7 7.8 7.0 8.3 8.3 Yoon-seok Seo +822-768-4127 P/E (x) 11.0 12.2 12.6 12.7 9.6 8.9 [email protected] P/B (x) 1.0 1.0 1.0 0.9 0.8 0.7 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Samsung Securities (016360 KS) Attractive entry point

Core profit sources on the rise; 2Q net profit of W124.5bn (+49.3% QoQ) Samsung Securities’ 2Q net profit came in at W124.5bn, in line with our forecast of Securities W133.0bn. The company’s 1H ROE of 10.4% (stripping away one-off factors) is the highest since 2010. Results Comment Core profit sources improved markedly, with brokerage commissions and gains on sales August 17, 2015 of financial products climbing 52.8% and 44% QoQ, respectively. SG&A expenses inched up as commission and marketing expenses increased in line with robust operating performances. In addition, the company recorded one-off gains of W39bn relat ed to the (Maintain) Buy disposal of its stake in Samsung Techwin.

Target Price (12M, W) 92,000 Robust asset inflow; ISA to provide fresh momentum Samsung Securities continued to enjoy robust asset inflow in 2Q. Total client assets Share Price (08/13/15, W) 47,900 grew 19.0% QoQ to W178.7tr (from W150.2tr). Net asset inflow is es timated at W9tr. We believe the implementation of individual savings accounts (ISA) should boost the Expected Return 92% inflow of assets to large brokerage firms. Despite the lower-than-expected ceiling on tax exemption, capital income above the ceiling will be subject to separate taxation with a low tax rate of just 9%. In addition, there is no alternative product that provides both OP (15F, Wbn) 498 comprehensive asset management services and tax benefits in Korea. The introduction Consensus OP (15F, Wbn) 436 of ISAs should spark a shift in the subject of tax benefits from products to accounts. In EPS Growth (15F, %) 63.1 the past, customers would buy financial products providing tax benefits to reduce their Market EPS Growth (15F, %) 28.2 taxes. Going forward, they should be able to maximize tax benefits by effectively P/E (15F, x) 9.3 managing their ISAs, including deposit terms, portfolios, and risks. Thus, the service Market P/E (15F, x) 11.0 should sharply boost demand for comprehensive asset management services. KOSPI 1,983.46 Unless Samsung Securities recognizes the ISA introduction as a one-off event and Market Cap (Wbn) 3,661 carries out only short-term marketing activities (as it did for the introduction of advisory Shares Outstanding (mn) 76 wrap accounts and overseas bond/equity trading services), the product should help the Free Float (%) 74.0 company to attract new asset management service customers as well as high net wealth Foreign Ownership (%) 23.8 individuals. Beta (12M) 2.29 Attractive valuation and potential treasury share buyback 52-Week Low 41,750 52-Week High 66,400 We forecast earnings to slow in 2H compared to 1H levels, in light of the high base of comparison from excessively strong profits on overseas equity brokerage and ELS early (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M redemptions in 1H. However, SG&A expenses are projected to decline in 2H. Absolute -12.9 1.9 -2.4 Relative -9.5 0.6 1.4 For 2H, quarterly pretax profit is estimated at W120bn, which translates to an ROE of 9.5%. Applying opportunity costs for shareholders of 7% (the rate typically applied in

160 Samsung Securities KOSPI the past) to the figure, the stock ’s P/B would be 1.4x. Given that the stock is trading at a

140 P/B of 0.9x and Samsung Securities is highly likely to buy back treasury shares, the current price appears to be a good entry point. We maintain our Buy call and target 120 price of W92,000, reiterating the stock as a top pick in the securities sector.

100

80 8.14 12.14 4.15 8.15 FY (Dec.) 03/13 12/13 12/14 12/15F 12/16F 12/17F Net operating income (Wbn) 960 454 769 1,141 1,108 1,159 Daewoo Securities CCo.,o., Ltd. OP (Wbn) 221 0 167 498 461 508 NP (Wbn) 158 11 230 372 350 385 [Securities/Insurance] EPS (W) 2,064 148 3,157 5,150 4,843 5,333

Gil-won Jeong BPS (W) 43,732 43,119 44,832 48,908 52,540 56,539 +822-768-3256 P/E (x) 26.3 297.1 14.1 9.3 9.9 9.0 [email protected] P/B (x) 1.2 1.0 1.0 1.0 0.9 0.8

Ju-hyun Kim ROE %) 5.5 0.3 6.7 10.4 9.0 9.2 +822-768-4149 Dividend yield (%) 1.2 0.2 1.5 2.1 2.3 2.5 [email protected] Stockholder’s equity (Wbn) 3,482 3,437 3,427 3,738 4,016 4,322

Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests, 12/13 figures are based on 9-month period

Humax (115160 KQ) Market environment and F/X turning favorable

Technology 2Q15 review: Operating profit of W10.1bn (+86.7% YoY, -26.3% QoQ) For 2Q15, Humax reported revenue of W346.2bn (-1.1% YoY, +1.2% QoQ) and Results Comment operating profit of W10.1bn (+86.7% YoY, -26.3% QoQ) . Revenue fell 2.4% short of our August 17, 2015 estimate (W354.6bn), and operating profit came in 25.1% below our forecast (W13.5bn). Revenue at the La tin American business, which tends to generate strong

margins, plunged to W48.4bn from W82.4bn in 1Q due to unfavorable F/X movements. (Maintain) Buy As a result, Humax’s overall OP margin also fell. The parent business (gateways and legacy set-top boxes) is believed to have delivered Target Price (12M, W) 24,300 revenue of W285.3bn and operating profit of W9.8bn on an OP margin of 3.4%. And Humax Automotive (consolidated since 4Q13 ; supplier of infotainment systems to GM Share Price (8/13/15, W) 16,750 and Renault) is estimated to have recorded revenue of W60.9bn and operating pro fit of W0.3bn (OP margin of 0.5%). Expected Return 45% For 3Q, we expect Humax to post revenue of W406. 7bn (+8.5% YoY, +17.5% QoQ), and

operating profit of W16.3bn (+43.0% YoY, +61.5% QoQ). With orders from the US and OP (15F, Wbn) 55 Europe on the rise, current F/X rate movements appear favorable . OP margin is Consensus OP (15F, Wbn) 60 projected to climb 1.1%p QoQ to 4.0%.

EPS Growth (15F, %) 71.5 Favorable market environment and profitability growth Market EPS Growth (15F, %) 28.2 P/E (15F, x) 10.6 Humax is enjoying both top- and bottom-line growth. 1) The company is diversifying its Market P/E (15F, x) 11.0 product portfolio beyond legacy set-top boxes to video gateways (home gate servers) KOSDAQ 731.36 and broadband gateways. We believe this makes the company well positioned to capitalize on the convergence of communications and broadcasting, as well as the Market Cap (Wbn) 401 growth of the Internet of Things (IoT). Shares Outstanding (mn) 24 Free Float (%) 65.5 2) Industry restructuring is reducing the number of competitive set-top box suppliers . The Foreign Ownership (%) 21.0 network equipment maker Arris Group, which previously acquired Motorola’s set-top box Beta (12M) 0.39 business, recently agreed to buy the British set-top box maker Pace for US$2.1bn. Cisco 52-Week Low 9,930 Systems has also decided to sell its set-top box unit to Technicolor. Looking forward, we 52-Week High 19,400 believe the market’s restructuring will present opportunities for Humax, which boasts strong technology and ample cash flow. (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M Absolute -3.5 0.6 47.6 3) Profit margins should improve in line with top-line growth. The company’s move to a Relative -1.1 -16.4 11.3 global production system has yielded cost-saving effects, with the SG&A expense ratio falling 1.3%p to 17.7% in 2014 (from 19% in 2013). This indicates that top-line growth is 190 Humax KOSDAQ 170 leading to a meaningful increase in operating leverage. 150 130 Maintain Buy with TP of W24,300 110 We maintain Buy on Humax with a 12-month forward target price of W24,300 . Our 90 target price was derived by applying a P/E of 12x (unchanged) to our 12-month forward 70 8.14 12.14 4.15 8.15 EPS of W2,036.

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 1,024 1,139 1,444 1,528 1,721 1,862 [Telecom equipment/Electronic OP (Wbn) 31 30 33 55 73 89 components] OP margin (%) 3.0 2.6 2.3 3.6 4.2 4.8

Wonjae Park NP (Wbn) 14 26 21 38 54 66 +822-768-3372 EPS (W) 599 1,154 919 1,575 2,267 2,770 [email protected] ROE (%) 3.4 6.4 4.9 8.2 10.8 11.9

P/E (x) 18.6 10.4 15.1 10.6 7.4 6.0 P/B (x) 0.6 0.6 0.7 0.8 0.8 0.7 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he U.S.

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURESDISCLOSURES & DISCLAIMERS IN APPENDIX 1 AATT THE END OF REPORT.

Hanwha Life (088350 KS) Loss ratio declines, but new risks emerging

Insurance 2Q15 review: NP of W223bn (+97.5% YoY); Solid loss ratio and investment yield Hanwha Life’s 2Q net profit reached W223bn, far exceeding our estimate of W150bn. Results Comment Loss ratio and investment yield were also positive. 1) Loss ratio came in at just 76.7% August 17, 2015 (-3.7%p YoY), driving mortality profit up to a historic high. And 2) investment yield reached 4.8% on the back of massive disposal gains (mostly from bonds).

The average funding rate fell 10bps QoQ thanks to aggressive crediting rate reductions . (Maintain) Trading Buy Meanwhile, the mix of fixed-rate reserves decreased 0.7%p QoQ to 52.5%.

Target Price (12M, W) 9,600 Nevertheless, new business value was tepid. The APE of protection-type new business fell 9.5% compared to last year’s quarterly average level. Share Price (8/13/15, W) 8,240 New variables: Potential tightening of LAT requirements Expected Return 17% Although Hanwha Life’s earnings are healthy, we believe that two factors could pose risks to the stock from a long-term perspective.

OP (15F, Wbn) 74 1) Margin improvement for life insurers will require the easing of negative spreads. Consensus OP (15F, Wbn) 196 However, interest rates are still unfavorable. (KDB Daewoo Securities expects another base rate cut in 2H.) In fact, the quick decline in interest rates has been overwhelming EPS Growth (15F, %) 69.5 Hanwha Life’s aggressive crediting rate cuts. And in the long term, minimum Market EPS Growth (15F, %) 28.2 guaranteed rates could put renewed pressure on negative spreads. P/E (15F, x) 10.2 Market P/E (15F, x) 11.0 2) Starting in 2H, regulators are expected to talk about tightening liability a dequacy test KOSPI 1,983.46 (LAT) requirements. We believe regulators will implement mark-to-market valuation of

Market Cap (Wbn) 7,157 liabilities ahead of the introduction of IFRS phase II, and establish separate reserve Shares Outstanding (mn) 869 guidelines by product type. Under the current interest rate levels, stricter LAT Free Float (%) 22.3 requirements would translate into heavier liabilities. And, eventually, Hanwha Life will Foreign Ownership (%) 15.7 have to shore up its fixed-rate reserves, which bear severe negative spreads. Beta (12M) 0.43 Maintain Trading Buy 52-Week Low 6,650 52-Week High 8,690 Following two rounds of interest rate cuts, Hanwha Life has shown solid performance relative to other insurance stocks. 1H earnings were strong, with the decline in loss ratio (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M being particularly encouraging. And a strong RBC ratio is heightening investor Absolute -1.2 7.0 19.8 expectations for higher dividend payouts. Still, we advise investors to keep tabs on two Relative 2.7 5.6 24.5 emerging risks in 2H: negative spread and stricter LAT requirement.

140 Hanwha Life KOSPI We maintain our Trading Buy rating with a target price of W9,600. 130 120 110 100 90 80 8.14 12.14 4.15 8.15 FY (Dec.) 3/13 12/13 12/14 12/15F 12/16F 12/17F Direct premiums (Wbn) 14,510 9,970 13,664 14,196 14,929 15,701 Daewoo Securities CCo.,o., Ltd. OP (Wbn) -289 -153 -347 74 -27 -13 NP (Wbn) 467 389 414 701 634 678 [Securities/Insurance] EPS (W) 538 448 476 807 730 780

Gil-won Jeong BPS (W) 8,059 8,053 9,957 10,260 11,232 11,843 +822-768-3256 P/E (x) 12.7 17.0 17.4 10.2 11.3 10.6 [email protected] P/B (x) 0.8 0.9 0.8 0.8 0.7 0.7

Ju-hyun Kim ROE (%) 6.9 5.6 5.3 8.0 6.8 6.8 +822-768-4149 Dividend yield (%) 2.2 1.7 2.2 3.0 2.4 2.4 [email protected] Stockholders’ equity (Wbn) 6,999 6,995 8,648 8,912 9,756 10,286

Note: All figures are based on non-consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates

Shinsegae International (031430 KS) Mixture of positives and negatives

Textiles/Apparel 2Q15 review: Non-consolidated OP of W3.6bn (-2.6% YoY) For 2Q, Shinsegae International reported preliminary non-consolidated revenue of Results Comment W202.8bn (+7.5% YoY), and operating profit of W3.6bn (-2.6% YoY ; OP margin of August 17, 2015 1.8%). Revenue exceeded our projection by 4.2% and the consensus estimate by 9.2%. Considering the unfavorable seasonality and the MERS outbreak , we see the revenue

result as solid. (Maintain) Hold However, operating profit fell 21% and 40% short of our forecast and the consensus estimate, respectively. The weak operating profit result appears mainly attributable to Target Price (12M, W) - 1) the weakness of the department store channel and 2) higher SG&A expenses arising from brand portfolio expansion. Share Price (08/13/15, W) 159,500 Despite the unfavorable market environment, the lifestyle unit continued to deliver solid Expected Return - growth, with revenue of W43.6bn (+11.1% YoY) and OP margin of 8.8% (+1.3%p YoY). Backed by the improved brand awareness of JAJU and product renewal, the lifestyle

unit, which has displayed robust growth since 3Q14, recorded a same-store sales (SSS) OP (15F, Wbn) 25 growth of 5% during the quarter. Consensus OP (15F, Wbn) 31 Mixture of positives and negatives EPS Growth (15F, %) 246.0 Market EPS Growth (15F, %) 28.2 Positives: The lifestyle unit is gaining growth momentum on the back of the JAJU brand. P/E (15F, x) 48.4 We believe Shinsegae International’s superior merchandising capability has been Market P/E (15F, x) 11.0 generating tangible results amid Korean consumers’ rising interest in and demand for KOSPI 1,983.46 quality everyday products. Profitability is high for everyday products, sales of which are not sensitive to seasonality (unlike apparel) . As such, the lifestyle unit is expected to Market Cap (Wbn) 1,139 boost the company’s overall revenue growth and profitability. Shares Outstanding (mn) 7 Free Float (%) 31.9 Negatives: Earnings at the foreign brand business, which accounts for about 50% of Foreign Ownership (%) 2.0 Shinsegae International’s overall revenue, have been weak, with revenue of W91bn Beta (12M) 0.59 (+0.1% YoY) in 2Q15. We believe that demand for traditional luxury brands is not as 52-Week Low 80,100 stro ng as in the past due to 1) the structural weakness of department stores and 2) 52-Week High 163,000 changing consumer behaviors. Although the company’s merchandising capabili ty (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M remains unrivaled, the foreign brand business is unlikely to overcome the impact of Absolute 25.6 78.0 73.4 changes in the overall market environment in the short term. Relative 30.5 75.7 80.3 Maintain Hold

190 Shinsegae International KOSPI The divergence in the performance of the foreign brand and lifestyle businesses 170 indicates that Shinsegae International may accelerate its business portfolio 150 130 restructuring efforts. Expectations for the JAJU brand are high, as the company has 110 been moving aggressively to strengthen the lifestyle business by introducing a new 90 creative director to take charge of product planning/design and merchandising. 70 However, the flagship foreign brand business is unlikely to recover to solid growth in the 8.14 12.14 4.15 8.15 short term. Therefore, we maintain Hold on Shinsegae International.

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 788 790 846 909 972 1,052 [Cosmetics, Hotel/Leisure, Fashion] OP (Wbn) 33 26 21 25 33 42

Regina Hahm OP margin (%) 4.2 3.3 2.5 2.8 3.4 4.0 +822-768-4172 NP (Wbn) 47 30 7 24 33 41 [email protected] EPS (W) 6,559 4,168 953 3,297 4,630 5,716 ROE (%) 12.3 7.2 1.6 5.4 7.2 8.3

P/E (x) 13.6 21.6 119.6 48.4 34.4 27.9 P/B (x) 1.6 1.5 1.9 2.6 2.4 2.2 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Healthcare (Overweight/Maintain)

Healthcare Weekly Briefing

1. Major issues Sector Briefing August 15, 2015 Spectrum Pharmaceuticals releases 2Q earnings (August 6th ) Spectrum Pharmaceuticals (US) reported its 2Q earnings on August 6 th , detailing its plans to advance SPI-2012 (neutropenia treatment) to phase 3 trials. The trials, which will enroll Daewoo Securities CCo.,o., Ltd. patients with breast cancer, are expected to begin at end-2015.

[Healthcare] In addition, the company is preparing to initiate phase 2 trials for poziotinib (breast cancer

Hyun-tae Kim treatment) in the US, in partnership with key opinion leaders. Based on early-stage clinical +822-768-3251 data, poziotinib is believed to have secured best-in-class potential among pan-HER inhibitors. [email protected] We expect the US clinical trials for SPI-2012 and poziotinib to proceed smoothly. Hanmi Seung-min Kim Pharmaceutical, under its technology out-licensing contracts with Spectrum Pharmaceuticals +822-768-4157 [email protected] related to SPI-2012 and poziotinib, is likely to book some milestones in 2H15. Progress in these clinical trials will likely drive the value of drug pipelines, which should in turn boost the

enterprise values of Spectrum and Hanmi.

TableTableTable 111.1. Spectrum PPharmaceuticalsharmaceuticalsharmaceuticals’’ R&D pipeline DrugsDrugsDrugs Indications Preclinical Phase 1 Phase 2 Phase 3 NDANDANDA

Melphalan hydrochloride for injection Multiple myeloma autologous stem cell transplant

Apaziquone Non-muscle invasive bladder cancer

Front-line aggressive NHL and front-line elderly Vincristine sulfate liposome injection Ph(-) ALL

SPISPISPI-SPI ---2012201220122012 Neutropenia: Breast ccancerancerancerancer

Poziotinib Multiple solid ttumorsumors

Belinostat Non-small cell lung cancer

SPI-1620 Non-small cell lung cancer and biliary cancer

Ozarelix Hormone dependent prostate cancer

Pralatrexate injection Front-line peripheral T-cell lymphoma

Belinostat Front-line peripheral T-cell lymphoma

Renazorb Hyperphosphatemia in end-stage renal disease

Source: Spectrum Pharmaceuticals, KDB Daewoo Securities Research

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including tthehe U.S.

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Fixed Income Weekly Lowered policy expectations to offer buying opportunities

Yields to rise on weakened rate cut expectations No signs of an additional base rate cut emerged during the August MPC meeting. In addition, while MBS issuance and the rollout of a supplementary budget have boosted concerns over supply, the outflow of foreign capital is now giving rise to worries about Fixed Income Report demand. As most investors still believe that there will be no more cuts this year , expectations for an uptrend in yields are solid. August 17, 2015 However, the external environment is becoming increasingly unfavorable, and the domestic economy looks weaker than the BOK’s expectations. Even the investors who Daewoo Securities Co., Ltd. belie ve that the central bank will not lower the base rate further this year agree that the

[Fixed Income] domestic economy is in bad shape. Although household debt growth and won depreciation are anticipated to reduce rate cut pressure, GDP growth should have the greatest im pact Yeo-sam Yoon on the BOK’s policy decisions. With this in mind, we advise investors to view any rise in +822-768-4022 [email protected] yields driven by weakened rate cut expectations as a potential buying opportunity.

At the most recent MPC meeting, the BOK maintained its neutral stance, emphas izing that GDP growth was still on track to meet expectations. The bank also said that the impact of China’s currency devaluation on the Korean economy was likely to be mixed . As a result,

bond yields rose on the day of the MPC meeting. However, FRA movements indicate that rate cut expectations are lingering to some degree.

Although July domestic indicators were in line with the BOK’s expectations, it is still far too early to declare that the economic recovery is well on its way. Notably, s lowing Chinese indicators could have a negative impact on the Korean economy. And while monetary easing by China has historically boosted Korean equities, things seem to be different these days. We believe that the adoption of an easing stance in China would serve as confirmation of serious economic difficulties in the country.

We note that Korea’s exports have historically benefited during periods of yuan strength . Unsurprisingly, Korea’s export growth has been slowing markedly alongside a yuan slowdown since 2013. In addition, Korea’s PPI, which is highly correlated with Chinese economic growth, has been on the downswing, indicating that domestic manufacturers are struggling.

Rise in KTB yields will be limited by rate cut expectations

(%p) 0.6 Korea Germany US 0.4

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0.0

-0.2

-0.4 US and German yield levels are similar to levels recorded at the start of the year; Korean yields are lower due to rate cut -0.6 1/15 2/15 3/15 4/15 5/15 6/15 7/15 8/15

Note: 0.0 = respective 10Y bond yields on 1/1/15 Source :Bloomberg, KDB Daewoo Securities Research Center

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSUREDISCLOSURESS & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Key Universe Valuations August 17, 2015

※All data as of close August 13, 2015, unless otherwise noted.

15F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 15F 16F 15F 16F 15F 16F 15F 16F 15F 16F 005930 Samsung Electronics 162,618 1,104,000 1.4 8.7 6.2 -6.9 8.5 8.7 8.1 1.0 0.9 12.6 12.3 015760 KEPCO 32,419 50,500 2.2 56.6 4.5 266.6 -47.6 3.3 6.3 0.5 0.5 16.9 7.9 005380 Hyundai Motor 31,610 143,500 2.5 -11.9 8.0 -7.1 2.1 6.0 5.9 0.7 0.6 11.4 10.7 000660 SK Hynix 25,953 35,650 1.1 13.1 0.6 8.5 2.8 5.6 5.5 1.2 1.0 22.9 19.4 090430 AmorePacific 22,243 380,500 0.3 42.2 37.5 56.2 35.3 44.4 32.8 7.9 6.5 19.2 21.7 034730 SK Holdings 21,003 298,500 0.7 23.2 9.0 356.4 4.3 25.7 24.6 4.3 3.8 22.7 19.8 032830 Samsung Life 20,700 103,500 - - - - 0.0 0.0 018260 Samsung SDS 20,621 266,500 0.2 14.3 13.8 12.4 12.2 44.4 39.6 4.6 4.1 10.8 11.0 017670 SK Telecom 20,308 251,500 4.0 3.5 7.3 5.2 5.1 10.7 10.2 1.2 1.1 12.8 12.6 012330 Hyundai Mobis 19,858 204,000 1.6 -10.7 11.1 -10.7 15.1 6.5 5.6 0.8 0.7 12.4 12.8 055550 Shinhan Financial Group 19,584 41,300 - - - - 0.0 0.0 000270 Kia Motors 17,735 43,750 2.6 -4.4 25.0 -0.3 14.9 5.9 5.2 0.7 0.7 13.0 13.7 035420 NAVER 16,811 510,000 0.2 12.7 34.4 32.0 35.5 28.0 20.7 5.1 4.2 28.8 29.4 005490 POSCO 16,086 184,500 4.3 -9.6 30.8 124.5 65.9 11.4 6.9 0.4 0.4 3.4 5.5 051910 LG Chem 15,739 237,500 1.7 53.5 26.1 61.5 35.5 12.5 9.2 1.4 1.2 11.2 13.8 033780 KT&G 14,416 105,000 3.3 14.8 -6.3 22.9 -10.5 14.2 15.9 2.2 2.1 17.1 14.1 105560 KB Financial Group 14,063 36,400 - - - - 0.0 0.0 051900 LG Household & Health Care 13,104 839,000 0.5 34.8 20.3 34.4 22.6 31.7 25.8 7.3 5.9 26.1 26.0 000810 Samsung F&M 12,412 262,000 - - - - 0.0 0.0 003550 LG Corp. 10,060 58,300 1.7 23.9 10.0 22.8 7.3 9.9 9.2 0.8 0.7 8.3 8.3 035250 Kangwon Land 9,328 43,600 2.5 16.8 12.2 25.3 14.2 20.7 18.1 3.0 2.7 15.8 16.4 010130 Korea Zinc 9,322 494,000 1.3 3.2 17.4 9.4 17.6 17.0 14.5 1.8 1.6 11.3 12.0 096770 SK Innovation 9,163 99,100 3.2 - -29.2 - -27.6 6.7 9.3 0.6 0.5 8.8 6.0 086790 Hana Financial Group 8,362 28,250 - - - - 0.0 0.0 011170 Lotte Chemical 8,243 240,500 0.4 348.5 0.4 696.9 6.9 7.0 6.6 1.1 0.9 16.7 15.3 035720 Daum Kakao 8,218 137,100 0.1 -42.7 105.4 -75.3 115.3 90.7 42.1 3.2 3.0 3.6 7.4 034220 LG Display 7,944 22,200 2.3 47.1 -34.0 49.0 -33.1 5.9 8.8 0.6 0.6 11.3 7.0 009240 Hanssem 7,860 334,000 0.3 35.1 34.9 35.3 34.3 67.1 49.9 16.5 12.7 30.8 31.8 023530 Lotte Shopping 7,841 249,000 0.6 11.3 12.6 37.8 13.4 10.4 9.1 0.5 0.4 4.4 4.8 030200 KT 7,781 29,800 1.7 - 2.1 - -15.8 10.0 11.8 0.6 0.6 7.3 5.8 000830 Samsung C&T 7,772 49,750 1.2 -19.4 12.2 61.9 9.6 18.2 16.7 0.6 0.6 3.3 3.5 024110 Industrial Bank of Korea 7,428 13,350 - - - - 0.0 0.0 004020 Hyundai Steel 7,219 54,100 1.4 10.8 4.8 44.4 -4.6 5.7 6.0 0.4 0.4 7.8 7.0 088350 Hanwha Life 7,157 8,240 - - - - 0.0 0.0 19745. 009540 Hyundai Heavy Industries 7,091 93,300 - - - - 13.6 0.4 0.4 - 3.4 0 010950 S-Oil 7,081 62,900 4.3 - -24.6 - -22.9 7.7 10.0 1.3 1.2 17.8 12.2 021240 Coway 7,065 91,600 3.0 21.1 12.9 30.7 11.9 21.7 19.4 5.9 5.2 31.0 31.8 066570 LG Electronics 6,595 40,300 1.5 -40.8 56.2 31.8 84.9 13.8 7.5 0.6 0.6 4.5 7.9 139480 Emart 6,537 234,500 0.6 -2.7 25.8 111.3 -18.2 10.7 13.0 0.9 0.8 8.7 6.7 086280 Hyundai Glovis 6,525 174,000 1.1 3.7 12.3 -16.5 30.0 14.6 11.2 2.1 1.8 15.3 17.5 001800 Orion 6,137 1,027,000 0.6 17.2 9.4 26.9 14.7 29.6 25.8 4.3 3.8 15.7 15.9 051600 KEPCO KPS 5,670 126,000 - - - - 0.0 0.0 006400 Samsung SDI 5,666 82,400 1.2 -73.3 859.1 - 45.4 26.5 18.2 0.5 0.5 1.9 2.7 097950 CJ CheilJedang 5,413 411,500 0.5 45.4 11.4 201.6 19.3 21.4 18.0 1.8 1.7 9.1 10.1 032640 LG Uplus 5,130 11,750 2.4 26.4 0.7 80.3 3.9 12.5 12.0 1.2 1.1 9.5 9.3 012630 Hyundai Development 4,802 63,700 0.8 81.1 27.2 241.9 34.2 20.4 15.2 2.0 1.8 10.3 12.6 008770 Hotel Shilla 4,788 122,000 0.3 39.1 87.5 67.2 124.2 39.7 17.7 5.9 4.5 15.8 28.7 004800 Hyosung 4,776 136,000 0.7 -1.9 -4.4 9.4 -4.9 16.3 17.1 1.5 1.4 10.1 8.8 036570 NCsoft 4,715 215,000 1.8 12.7 22.1 19.7 15.1 17.1 14.9 2.8 2.5 18.8 18.8 161390 Hankook Tire 4,695 37,900 1.1 -21.0 13.2 -12.4 12.7 7.7 6.8 0.9 0.8 12.9 13.0 Source: KDB Daewoo Securities Research

Market Data August 17, 2015

※All data as of close August 17, 2015, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 343.39 0.00 0.00 -11.20 USD/KRW 1,174.20 1,190.30 1,148.40 1,028.10 KOSPI 1,968.52 -14.94 -0.75 2.18 JPY100/KRW 944.57 958.34 925.05 1,003.66 KOSDAQ 722.01 -9.35 -1.28 30.39 EUR/KRW 1,302.89 1,327.90 1,249.06 1,373.75 Dow Jones* 17,477.40 69.15 0.40 -1.99 3Y Treasury 1.72 1.73 1.78 2.54 S&P 500* 2,091.54 8.15 0.39 1.62 3Y Corporate 1.97 1.97 2.01 2.93 NASDAQ* 5,048.23 14.67 0.29 6.80 DDR2 1Gb* 1.16 1.17 1.19 1.62 Philadelphia Semicon* 631.04 -3.83 -0.60 -8.11 NAND 16Gb* 1.56 1.56 1.69 2.38 FTSE 100* 6,550.74 -17.59 -0.27 0.04 Oil (Dubai)* 47.69 48.62 55.95 102.90 Nikkei 225 20,620.26 100.81 0.49 18.45 Gold* 1,112.90 1,115.70 1,153.50 1,313.90 Hang Seng* 23,991.03 -27.77 -0.12 0.56 Customer deposits (Wbn)* 21,427 22,260 15,445 Taiwan (Weighted) 8,213.42 -92.22 -1.11 -11.44 Equity type BC (Wbn)(Aug. 12) 78,072 77,077 78,386 Note: * as of August 13, 2015 Source: KSDA, Wisefn, DRAMeXchange, MSCI

KOSPI Top 10 Foreign Net Buy / Net Sell (Wbn) KOSPI Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell LG Chem 12.69 Samsung Electronics 87.83 Samsung Electronics 18.24 KODEX LEVERAGE 28.15 SK C&C 12.54 Hynix 56.22 KODEX 200 18.09 SK C&C 14.89 Amore Pacific 9.14 KODEX 200 22.54 Kia Motors 12.17 Daesang Corp. 11.67 COSMAX 8.88 Kia Motors 13.87 KODEX INVERSE 11.95 Samsung Corp. 8.72 Samsung Life Insurance 8.14 LG Display 12.51 TIGER200 10.34 Amore Pacific 7.96 Hyundai M&F Insurance 5.38 TIGER200 10.52 Hyundai Motor 10.06 Hynix 7.74 Hyundai Mobis 4.71 SK Telecom 8.14 Hanmi Pharm 9.09 BGF Retail 5.24 Hansae 3.75 Hyundai Heavy Industries 8.12 SK Telecom 9.06 CHEIL INDUSTRIES 4.72 CJ CGV 3.69 KT&G 8.10 KB Financial Group 5.89 Glovis 3.64 SK Energy 3.41 Hotel Shilla 7.72 KT&G 5.49 Hyundai M&F Insurance 3.03 Source: KSDA, Wisefn

KOSDAQ Top 10 Foreign Net Buy / Net Sell (Wbn) KOSDAQ Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell Wemade 7.99 Daum Communications 9.70 Medy-tox 5.51 FINETEK 8.09 Dongsuh 5.97 Celltrion 6.86 Sansung P&C 4.75 Dongsuh 5.25 OSSTEM IMPLANT 4.69 CJ O Shopping 4.96 OSSTEM IMPLANT 3.70 PEPTRON 4.01 Bio Space 4.30 Sansung P&C 3.58 Spigen Korea 3.46 HLB 3.97 Medy-tox 3.82 Interpark 2.48 HaanSoft 3.42 ISC 3.10 SM 3.73 FINETEK 2.15 Com2us 3.13 MCNEX 2.48 Gamevil 2.67 Paradise 2.12 YG Entertainment 3.10 Webzen 2.39 HaanSoft 1.69 Komipharm 2.03 CJ O Shopping 2.83 Joymax 2.11 Access Bio 1.69 Binex 1.99 Value Added Technology 2.55 KCP 1.57 Maeil Dairy Industry 1.65 ViroMed 1.81 CJ E&M 2.44 Wemade 1.47 Source: KSDA, Wisefn

KOSPI Top 10 by Market Cap (Wbn) KOSDAQ Top 10 by Market Cap (Wbn) Close (W) Chg (W) Mkt Cap Close (W) Chg (W) Mkt Cap Samsung Electronics 1,104,000 -36,000 162,618 Celltrion 79,500 -1,800 8,906 KEPCO 50,500 900 32,419 Daum Communications 137,100 -3,000 8,218 Hyundai Motor 143,500 -1,000 31,610 Dongsuh 44,350 2,050 4,422 Hynix 35,650 -1,250 25,953 CJ E&M 89,300 0 3,459 Amore Pacific 380,500 2,500 22,243 Medy-tox 522,000 33,300 2,953 SK C&C 298,500 -12,000 21,003 ViroMed 170,700 -8,000 2,424 Samsung Life Insurance 103,500 3,800 20,700 LOEN 91,900 -1,900 2,324 SAMSUNG SDS 266,500 2,000 20,621 Paradise 22,150 -150 2,014 SK Telecom 251,500 2,000 20,308 EO Technics 123,400 -100 1,514 Hyundai Mobis 204,000 -1,000 19,858 Kolon Life Science 203,700 -5,500 1,363 Source: Korea Exchange